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V0936-22 29 April 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IVA · arrendamiento de inmueble

Leasing of mixed-use property (residential and office) is subject to 21% VAT

A query was raised regarding whether the lease of a property used partially for residential purposes and partially as a psychology clinic is subject to VAT, and whether there is an obligation to withhold Income Tax (IRPF). The Directorate General for Tax (DGT) ruled that non-exclusive residential use triggers VAT liability and that there is an obligation to withhold Income Tax proportional to the portion used for economic activity.

The question raised

Taxation of the transaction in Value Added Tax and whether there is a withholding obligation in Personal Income Tax.

The DGT's ruling

The lease of real estate is exempt from VAT only if the use is direct and exclusive as a residence by the lessee. If part of the property is used for other purposes, such as a professional office, the rent shall be subject to VAT at the rate of 21% on the total amount. Regarding Personal Income Tax (IRPF), a withholding obligation exists when the lessee pays the rent in the course of an economic activity, applying the withholding only to the proportional part of the income corresponding to the square meters used for said activity.

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